As the U.S. economy inches toward the "fiscal cliff," the country's small banks are approaching a cliff of their own, in a development that could pinch short-term lending rates, the Wall Street Journal reported yesterday. On Jan. 1, a program that insures an unlimited amount of money in non-interest-bearing accounts will expire unless Washington moves to extend it. Without the Transaction Account Guarantee program, an insurance cap resets to $250,000, affecting about $1.6 trillion in deposits. And without insurance protection, depositors may be compelled to move amounts above $250,000 to other venues deemed safer, leaving the banks with less business. J.P. Morgan estimates that, of that total, $579 billion could be on the move.
